Stock Market Predictability and Industrial Metal Returns

Ben Jacobsen (), Ben R. Marshall () and Nuttawat Visaltanachoti ()
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Ben Jacobsen: TIAS School for Business and Society, 5000 LE Tilburg, Netherlands
Ben R. Marshall: School of Economics and Finance, Massey University, Palmerston North 422, New Zealand

Management Science, 2019, vol. 65, issue 7, 3026-3042

Abstract: Price movements in industrial metals such as copper and aluminum predict stock returns. Increasing industrial metal prices are good news for equity markets in recessions and bad news in expansions. A one-standard-deviation increase in industrial metal returns predicts a price drop of one and a half percent in monthly stock market returns in expansions and an increase of around a half percent during recessions. The predictability is distinct to and compares favorably with that from more established predictors.

Keywords: industrial metals; state-switching; return predictability; gradual information diffusion; business cycle (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (26)

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